Diagnóstico Empresarial

18 MIAB (2004), Report 2004, September 27, p. 4.

(b) "All business insurance renewal notices must be served, at a minimum, eight weeks in advance of their conclusion."21

(c) "In view of the complexity and the size of the renewal of liability insurance, a statutory minimum period of renewal notice accompanied with a certificate of claims and provisions for claims should be set at 60 days."22

For some policies, even a full month is not likely to be sufficient to allow the buyer to conduct an effective shop and consider its alternatives.

7.37 Furthermore, liability policy renewal notices do not include "no claims discount" information or any other information that a buyer can use to demonstrate experience to alternative insurers. If the buyer wants to shop around for alternative quotes, either through an intermediary or directly, it has a need for documentary evidence from the existing insurer regarding its claims history. The buyer’s own records cannot generally be used to prove that it has had no claims. On the contrary, its records would only provide evidence of the claims that have been made against the policyholder for which indemnity has been sought. The provision of claims history information with EL and PL insurance policy renewal notices will enable the buyer to demonstrate its experience to other potential insurers. Shopping the market for new cover would therefore be facilitated if a claims history were supplied to the buyer along with the renewal notice in line with the principle operating for private motor insurance.

Recommendations

7.38 The recommendations below relate to the provision of information by insurers to facilitate buyer decision- making upon renewal, including the consideration of alternative EL and PL policies. The first

recommendation relates to the provision of renewal notices sufficiently far in advance of the expiration of existing cover to allow buyers to seek, evaluate, and select among alternative policies.

Recommendation I1

IFSRA should modify its code of conduct for insurers to require that renewal notices for liability insurance be sent by insurers so as to reach buyers at least eight weeks prior to the expiration of the buyer’s existing policy.

7.39 An early renewal notice with claims history information should be useful to buyers. It should trigger

discussions with intermediaries or insurers with sufficient time for options to be developed and considered. Recommendation I1 calls for renewal notices to be received eight weeks prior to the expiration of the existing policy. This should be sufficient time for buyers to procure and evaluate quotes from alternative insurers. For some liability policies, one month should provide sufficient time to shop the policy to other insurers, but other policies may take longer. As described by intermediary Coyle Hamilton to the Joint Oireachtas Committee: "Coyle Hamilton starts the renewal process between six to eight weeks prior to the expiry date of a policy. Recently, it has been extended to 12 weeks because as businesses have become more complex, insurers need more information. Coyle Hamilton agrees with the Construction Industry Federation on this point."23

Buyers should have sufficient time to develop alternatives, and Recommendation I1 is designed to provide sufficient time for an adequate evaluation of alternatives by most EL and PL purchasers.24 7.40 If a renewal notice is received late by the buyer, then

the buyer should be able to continue coverage, at the lesser of the old premium rate and the new premium rate, for a period sufficient to enable it consider alternative policy options. The extension should provide the buyer the full period to consider alternatives allowed by the code of conduct. For example, if renewal notices are required eight weeks prior to the renewal date but a buyer receives notice five weeks prior to this date, the old coverage should be extended for an additional three weeks to allow the buyer sufficient time to shop for a new policy.

Recommendation I2

IFSRA should modify its code of conduct for liability insurers to require that, if a renewal notice is received late under the framework set out in Recommendation I1, then the buyer has the option to extend the cover under the old policy, at the minimum of the old rate and the quoted new rate, for the amount of time needed to extend the buyer’s time available to shop for new cover consistent with the eight week time period contained in Recommendation I1.

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20 Community and Voluntary Pillar (2004), Submission to the Competition Authority re: Insurance from the Community and Voluntary Pillar of Social Partnership, July, submission to The Competition Authority, response to questions 21, p. 7.

21 Alliance for Insurance Reform (2004), Submission by the Alliance for Insurance Reform, submission to Joint Oireachtas Committee, 2004, recommendations directed at IFSRA, p. 8

22 Irish Hotels Federation (2004), Competition Issues in the Non-Life Insurance Market, 15 April, submission to The Competition Authority, p. 2. 23 Coyle Hamilton (2004), Testimony of Mr. John Bisset before the Joint Oireachtas Committee on Enterprise and Small Business, 21 April.

24 Insurers provide some renewal notices to intermediaries, who in terms provide renewal notices to buyers. Recommendations regarding the provision of renewal notices in this case are provided in Chapter 10.

7.41 This Recommendation has two purposes. The first is to ensure that late renewal notices cannot be used to lock in customers. If a renewal notice – and hence the quote to continue indemnity cover for an additional year – is received late, the buyer is guaranteed an opportunity to consider alternatives without financial penalty. If the premium quoted represents an increase, then the extension price is the old price; if it is a decrease, then it is the new price. This is needed so that, if the premium is being reduced, then the limited extension is not a means for the insurer to lock in a higher price for some period of time. The second purpose is to provide incentives for insurers to send renewal notices earlier.

7.42 The next recommendations deal with claims history information. They relate to motor and liability

insurance. The first relates to providing claims history information with renewal notices. However, buyers need not wait for a renewal notice before considering alternative policies. The second recommendation requires claims history information to be provided, even absent a renewal notice.

Recommendation I3

IFSRA should modify its code of conduct for motor and liability insurers to require that renewal notices include a certified history of claims for the buyer. Claims histories should cover at least the previous five years and include any outstanding claims from earlier years.

Recommendation I4

IFSRA should modify its code of conduct for motor and liability insurers so that they are required to provide a certified claims history to any buyer upon request. Claims history information should be provided in hard copy if so requested by a buyer.

7.43 Claims history information should be provided in hard copy if so requested by a buyer. However, insurers may wish to make this information available through electronic means, for example, over the Internet. This may reduce costs and increase the ease of access to this information.

7.44 The claims history information called for in

Recommendations I3 and I4 is more detailed than the "claims free" certifications currently provided to motor policyholders. A minor accident and a major accident are both claims, but they have different implications in terms of severity, insurer cost, and the riskiness of the

policyholder. So too is the distinction between a stolen vehicle claim and an accident resulting from drink driving.

7.45 Claims histories need to be recognised as valid or authentic by other insurers. The next Recommendation calls for the development of a standardised format for such histories. This may be particularly important for liability policyholders where claims information may be more diverse.

Recommendation I5

IFSRA, in cooperation with the IIF, should develop a standardised format for motor and liability claims histories. This format should enable insurers to certify the accuracy of any information provided.

7.46 Using a standardised format will facilitate both ease of switching and quicker analysis of risk profile by potential new insurers. Policyholders will not have to prove otherwise their claims history and insurers can be confident that the information they receive is true and accurate.

7.47 Switching insurers benefits the individual or business making the switch, but it also generates positive externalities. Individuals that do not switch suppliers gain from the increased competition that is generated by those that do. Given that benefits accrue to all buyers, it is beneficial to encourage switching by creating an environment in which customers can fully evaluate and take advantage of their options in the marketplace. The Recommendations in this section allow such an evaluation. Furthermore, given the broad benefits to all buyers that result, individual buyers should not have to bear the costs of, for example, receiving a claims history. Instead, these histories should be provided free of charge.

7.48 This section makes five recommendations related to the provision of information by insurers to buyers. The information called for includes quotations for policy renewals and claims history data. It is recommended that both types of information be provided sufficiently far in advance of policy expiration to enable buyers to consider alternative cover. These recommendations are proportional to the concerns raised. Some claims history information is provided already, as with a "no claims discount", and renewal notices are provided under current practice. The Recommendations call for giving buyers information earlier and also giving access to more information.

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